Cross-border opportunities in Nordics include resi and municipal properties

Date: 5 April 2012

Cross-border real estate investors active in the Nordics tend to favour shopping centres, but other segments offer attractive returns as well, according to panellists at PropertyEU's Nordic Investment Briefing held at CBRE´s office in London last week.

Residential is one of the segments that offer significant opportunities, the panel said. 'A lot of the second-and third-tier cities in Sweden have population growth of 1-2%, ' panellist Ari Danielsson, managing director at Reviva Capital, pointed out, adding that in some areas like Oslo in Norway, the construction pipeline virtually came to a complete halt in 2008-9. 'There is a lot of excess demand and we don’t see any vacancy in residential assets in decent locations.'

Local investors see such assets as providing relatively healthy and steady cashflows and a good return on their investment, but the question is whether a foreigner would get involved in such management intensive assets, Danielsson said.

Karl Persson of CBRE agreed that the residential sector offers potential for attractive returns, though financing is limited for assets which require refurbishing.

Persson noted that CBRE has begun marketing Turning Torso, a prime residential tower in the Swedish city of Malmö, which at 190 metres is the second largest building in Europe and probably the best-known building in Sweden. The property is expected to attract interest from both local and international investors, he said.

'I would also focus on logistics and industrial properties in secondary markets in Sweden where we can see low vacancy rates and pretty low rental levels that will increase,' Persson added.

Panellists Anders Tagt of Deutsche Pfandbriefbank and Thomas Persson of Catella said there were good opportunities for offices in secondary locations in Stockholm or value-add, core -plus properties. 'Yields will rebound in this segment when the financing market improves. I think we will see more Swedish and international investors competing in that segment two years from now,' Thomas Persson said. ‘Then I would probably look in Copenhagen for opportunities there.’

Senior living and municipal properties are two other segments that have grown in popularity and become increasingly institutional in recent years. Hemsö - a joint venture between listed property company Kungsleden and the Swedish Third Pension Insurance Fundhas acquired EUR 2-3 bn of municipal assets in the past few years including high schools and a municipal library.

Rikshem, another partnership co-owned by pension funds Fjarde AP-fonden and AMF, has also been an active buyer of residential and public properties including health and social care facilities, schools and kindergartens.

By contrast, foreign investors active in the Nordics have tended to favour retail assets, said Peter Damesick, EMEA Chief Economist at CBRE. While other opportunities exist, retail remains an area where cross-border investors can add value and compete with the equity-rich local institutions who tend to dominate the core office segment in the major cities, he said.

Read more on the Nordics in the April edition of PropertyEU Magazine. Click on the link below to subscribe